Wednesday, 6 January 2010

Chiefs and the economy: Rise of entrepreneurship

The last post in this series asserted that the role of chiefs in the local economy is intrinsically embedded in the nature of the economic system. In particular, chiefs continue to provide the basis for economic activity through mediation of local social order in face of the short /ineffective arm of central government. We noted that this role manifests itself in the entrepreneurial sphere. Chiefs are constantly shaping the nature of the ensuing economic activity through access to factors of production and financial capital. Far from being a threat to central governments, the chieftaincy should rightly be viewed as providing an opportunity for government to achieve its economic and societal goals. That left a number of questions. Is the economic influence of chiefs increasing or decreasing? What factors shape their reactive or proactive influence on economic change? What does it tell us about the likely future of chiefs in a modern Zambia? These are some of the questions we attempt to explore in this post.

In recent time there has been a growing movement of local chiefs directly becoming involved in securing a fair economic share for their subjects (or perhaps simply for themselves). The level of activity has taken on many forms. At the basic level, we have seen the gradual move towards commercialisation of existing traditional activities, principally traditional ceremonies. In recent years these ceremonies have become big businesses with dedicated business sponsorship. For example, at last year’s Nc'wala, Zain Zambia carried out repair works on the main arena, with National Credit and Savings (Natsave) bank sponsoring lunch for dignitaries that attended the ceremony. There was even the Nc'wala Ceremony Golf Tournament, a one-day 18- hole golf tournament that saw 55 from golfers compete across the country. The tournament was sponsored by Aupie-Agro Foam with proceeds donated to the Ngoni Royal Establishment (NRE). All of these of course are accompanied and fuelled by the politicisation of ceremonies, where last year alone we saw the likes of Zuma, Mugabe, Mutharika and Katumbi attend traditional ceremonies.

At the fundamental level, there has been a significant transformation towards significant direct involvement of chiefs in the production processes. As we have previously discussed, entrepreneurial actives are not alien to chiefs. Indeed it’s these entrepreneurial activities that partly financed the independence struggle. However, under the one party state this spirit was stifled. It cannot be mistaken that until full liberalisation of the economy in the early 1990s, no serious rise in chiefdom led capitalism had taken place, for reasons we’ll touch on later on. This trend has been changing in recent years, with Chief Chizela, of the Kaonde in Mufumbwe, becoming the first traditional leader to get a full-scale mining licence as back to 2005. This saw fruition in 2008 when the Chief inked a deal with American Company to develop eight mining licenses in the next few years. These licenses are owned by the Chief, who also has a 40% share of the Joint Venture to be set-up by Mayfair. The company paid Chief Chizela $50,000 as ‘signing amount’ and has promised $500,000 in loans to be paid back from dividends on his share.

Senior Chief Kalile also emulated this approach by appealing to the Government to grant him a licence for small-scale mining in his chiefdom. The traditional leader went on to form a mining company, Fyesu Minerals Limited, with the view of mining copper. The motivation to the chief appears to have been to give a greater stake in the development process for his people: "there are copper deposits all over my chiefdom, but people are not mining it because of the difficulties faced in the acquisition of small-scale mining licences". The chief is also looking to branch with a timber licence in order to "earn extra income as money received from the Government was not enough to support his family and subject".

Other chiefs are following suit. A friend of mine narrates how a Chief in Northern Province has worked to develop a “tribal corporation”. They have set up a “company” run by the Chief and his sub-headmen as partners. Their main goal is to encourage self reliance through agriculture and tourism. The ground is good in the area, so the Chief has been soliciting for funds through the company from donors, locals and people in the diaspora, as well foreign investors. At the moment, on the agriculture side, they have establish smaller subsidiaries or enterprises where subjects are able to source for seed and fertilizer. Their produce is first supplied to the locals and the excess is exported. They have also collaborated with a few NGOs. On the tourism side, there is much work required but the plan is to exploit the vast natural scenic locations the area offers from bush to hot springs. The intention is to structure the deal in such a way that the locals have control but through the enterprise. This has all been the vision of one chief in Northern Province, and with no government help!

All of this has led to interesting questions on why chiefs who clearly have always held significant advantages in terms of social position for developing business are only until recently beginning to move towards recapturing the pre-independence entrepreneurial spirit. There are a number of reasons to this :

Historical factors : As we have previously discussed during colonial times chiefs worked well within their constraints and were local engines of growth. Certainly many of the local stores that emerged were led by them. They used the “native treasuries” to their advantage, investing in a lot of profitable activities whose revenues partly funded the independence struggle. After independence, with the One Party state reforms, that entrepreneurial spirit was restricted (the land reforms did not help), and perhaps Chiefs are only again beginning to realise the opportunities that exist within their chiefdoms! In that sense the market and constitutional reforms of the Chiluba era, in particular the land reforms of 1995 and the constitutional amendment in 1996 which defines the chieftaincy as "a corporation sole with perpetual succession and with capacity to sue and be sued and to hold assets or properties in trust for itself and the peoples concerned", effectively gave chiefs a new lease of economic life. The land chiefs possess is of immense value, and some have used this intelligently to amass wealth for themselves and provides the basis to engage in contracts as we have seen with Chief Chizela and others.

Reduced role of government : Related to historical factors discussed above, the reduced role of government support post 1990 has provided sufficient incentive for chiefs to pursue economic activity. Increased poverty levels especially with the SAP reforms have forced chiefs to become more involved in pushing ways to get people out of poverty. The breakdown in social cohesion continues to pose significant threat to the authority of the chieftaincy. Chiefs now realise that cultural and economic objectives are inter-twinned. Unlike under One Party State where the government operated a command and control economy. In the new liberalized economy, the people are largely left to fend for themselves and define their voices to compete for investment and political support.

Educated chiefs : We now have a number of well educated chiefs who are able to discern economic opportunities. Chief Kapalaula recently expressed the mood of this new educated generation best when he noted: "I must make it abundantly clear to all megalomaniacs who have become swollen-headed as challenged heroes of sarcasm i.e., the fake sophisticates who look down upon chiefs as yokels with little intelligence....as a new breed of traditional leaders, we are just as educated, intelligent and politically enlightened as anybody else". The steer towards education is both natural in so far it may reflect the increased pool of educated rural dwellers, but it’s also as a result of the transformation role chiefs are expected to play given the new incentives they face, as discussed above. The skills of the chiefs to impose himself on the national scene in order lobby economic investment and government support has become critical. Rural dwellers are now increasing demanding articulate representative or local traditional leaders who can drum up support for their economic and political causes. Educated chiefs can help attract investment, secure political support and bring new ideas to support local cohesion whilst simultaneously enriching existing traditions.

New political pluralism : The advent of multi party politics and associated increased electoral competition has spurred economic involves by giving chiefs unparalled opportunities to emerge as "kingmakers" and use this exact significant economic rents from political players. Since the dawn of multi-party politics, chiefs have emerged as critical players in a way they had not been during the first and second republic. Securing support from chiefs is instrumental in building momentum and showing that that the nation is united behind the vying party. The pandering to chiefs usually takes the form of rehabilitation of palaces, increased subsidies, financial gifts and famously, loans for expensive vehicles. In recent months we have even witnessed chiefs offered foreign medical care and even foreign trips by government backed investors. All of these things have tended to enrich chiefs.

Political gifts, rewards and other “bribes” has fuelled further demand from various constituency for chiefs to be seen undertaking productive activities. In 2008, President Mwanawasa regretted that a number of chiefs were applying for chief loans to buy small cars instead of buying bigger vehicles or tractors that will be of benefit to the chiefs themselves and their subjects. In his view, chiefs had sufficient resources in form of subsidies, payments from community resource boards and sources, such that they should be able to transform themselves into rural entrepreneurs : “subsidies should not be the only source of income for our traditional rulers…Chiefs should take the lead in business in their chiefdoms”. A politician’ response to the increasingly pressure by ordinary Zambians for resource transfers to chiefs to become 'developmental'.

Taken together, these factors are spurring entrepreneurial pursuit. Of course the obvious question is whether this resurgence in entrepreneurship is a “good thing”. Very few people would deny that in so far entrepreneurship can spur local economic activity, it helps increase local economic development. There’s consensus that growth is a prerequisite for development. In so far as chiefdom led entrepreneurship is spurring local growth this must be welcome. That is not to say there are no social side effects which need to be managed. In particular the rise in chiefdom led capitalism may slow down land reform and intensify boundary disputes. Both issues should be addressed by government in any case, unfortunately not much is being done to address them.

In summary we can conclude that spurred on by intrinsic economic nature of the institutions, chiefs in recent years have recaptured their entrepreneurial spirit. The increase in economic and political liberalisation has provided new opportunities, as well as challenges to be managed. Not all chiefs have grasped these opportunities nor is there a systematic framework for managing the downsides. In the next post in this series we’ll explore the constraints that chiefs are facing to achieve their full potential what steps government should take, if any, to spur further growth in chiefdom led entrepreneurship.

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